Chattel Mortgage

How does a Chattel Mortgage Work?

This type of finance is where a loan is raised to purchase any new or used Truck or Heavy Vehicles using the equipment as security. This type of loan uses the moveable chattel as security as opposed to bricks and mortar security and gives the clients notable taxation benefits.

Features of a Chattel Mortgage Facility

full gst on the purchase price claimed as a gst off-set on next lodged business activity statement

depreciation and interest is claimed as a tax deduction at the end of the financial year on customers profit and loss statement reducing tax paid to the ATO

term of a Chattel Mortgage can range from 12 months to 84 months
fixed interest rate applies

ownership of the asset is transferred to the client at time of purchase
payments can be made weekly, monthly, quarterly, yearly or structured (i.e. agreed payments over different times of the year)

balloon payment at the end of the term can be applied to the loan to reduce monthly payments

client can contribute a deposit towards the purchase (either through trade in or cash) or fund 100% of the cost of the asset

A Chattel Mortgage can also be referred to as a Commercial Loan Agreement

Benefits of a Chattel Mortgage Facility

financing trucks or heavy equipment using a chattel mortgage loan product (as opposed to using own funds) will preserve cash flow and maximise working capital position

flexible payment options allow clients to make payments suitable to their cash flow

option of a balloon payment at the end of the term reduces payments over the term of the loan

Chattel Mortgage loans for heavy vehicles can be assessed on either a full doc or low doc basis

as these types of loans use the equipment as security, it allows clients to free up property equity to pursue other investment opportunities

balloon payment can be paid out at the end of term (by way of trade in or cash payment) or refinanced (by way of new loan agreement)

tax deductibility at end of the financial year as client can claim depreciation and interest as on their profit and loss statement

Example of a Chattel Mortgage Facility used for Truck Finance

Purchase Price of new Mack Superliner – $540,000 (gst inc)

Finance Type – Chattel Mortgage

Loan Amount – $540,000 (gst inc)

Term – 60 months

Balloon – 30% or $162,000

Payments – monthly in arrears

Outcome

Client could claim $49,090.91 (full gst amount on the invoice) as an input tax credit on their next lodged business activity statement (gst calculated by $540,000 / 11 = $49,090.91)

Depreciation and Interest claimed as a tax deduction on the company profit and loss statement – approximate reduction of taxable income by $60,000 (depending on the depreciation method used by the clients accountant)

The 30% balloon payment applied to reduce monthly payments on the loan over the 5-year period (payments are only calculated on $378,000 – ie purchase price $540,000 less the balloon amount of $162,000)

Who would use a Chattel Mortgage Product?

A Chattel Mortgage is the most commonly used form of financing heavy machinery in Australia, for businesses operating under a cash based accounting system.

Heavy Vehicle Finance advises that all clients need to discuss a particular funding scenario with their Accountant before making a decision on what product to use when financing trucks or any type of heavy equipment. By discussing Chattel Mortgage Finance with the Accountant, clients will receive the most relevant information based on their own financial structure.

Want to ask more questions about a Chattel Mortgage Finance Facility?

To discuss how a Chattel Mortgage loan works in further detail, please call one of our Finance Consultants on 1300 788 740. One of our specialists Finance Consultants will be able to suggest the best product relating to your particular funding scenario. Or alternatively you could also fast track the process by completing our online finance pre-approval form.

Finance Pre-Approval

HEAVY VEHICLE FINANCE REVIEWS

All I had to do to get my loan approved with Heavy Vehicle Finance was to upload my business account statements for the last 90 days. Once I did this, the loan was approved within 24 hours and the deal then settled not long after this. Great job Heavy Vehicle Finance.

Harley Iacovelli

H & M Trucking Pty Ltd

Just dropping by to send a very big thankyou to Nathan Elliott. Nathan recently settled a couple of finance deals on a Western Star Prime Mover and Titan Quad Float for me. The process was very quick, easy and was probably the only time I have dealt with finances without getting a headache. Keep up the good work Heavy Vehicle Finance.

Heavy Vehicle Finance has facilitated 5 new Hino Horse Trucks for our Transport business over a 5-6 year period. On each occasion, we were happy with the quick turnarounds for approvals right through to the settlements. I hope to continue using Heavy Vehicle Finance for future purchases of our horse trucks.

Tracey Hall

Scone Equine Transport Pty Ltd - NSW

Great service, very professional, very proficient, and excellent communication throughout the process. Highly recommended and many thanks from Northern Rivers Concrete Pumping.

Aaron Bylos

Northern Rivers Concrete Pumping Pty Ltd - NSW

Without Heavy Vehicle Finance my business venture would have never left the ground. In my circumstances there was a fair bit involved as I was starting from scratch but with the professional experience and advice Nathan gave me I was able to purchase a Truck, Superdog Trailer and Skidsteer stress free. I am definitely recommending Nathan and his team from Heavy Vehicle Finance for anyone considering Finance for their equipment.

Ben Fisher

Rykiner Contracting Pty Ltd - SA

Nathan gave great service and a great deal, can’t speak highly enough of him, would recommend him to anyone, he is efficient and quick and friendly AAA plus Thanks Guys

Angela McDonald

Niduts Pty Ltd - QLD

Just like to say thanks to Nathan at Heavy Vehicle Finance for the excellent service provided in the purchase of my brand new Mack truck. Quick. Easy no hassle and very friendly service. Thanks Nathan. Highly recommended Will use again if wife lets me.